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Who Loses Most When Big Banks Suddenly Fail? Evidence from Silicon Valley Bank Collapse

Author

Listed:
  • Liu, Xia
  • Megginson, William
  • Tran, Nhu
  • Wei, Siqi

Abstract

We analyze the market reaction of 137 Silicon Valley Bank (SVB) depositors and 251 SVB borrowers to the bank's collapse. Depositor shares experience a -5.12% abnormal return (AR) on the event date (March 10, 2023), and a -12.38% cumulative abnormal return (CAR) over a 30-day post-event window. More surprisingly, the borrowers also experience a similar event-day AR (-4.16%) and an even worse 30-day post-event CAR (-13.47%). SVB clients have worse CARs if they are smaller, with higher cash holdings, or with lower market-to-book ratios. These results indicate that borrowers appear to suffer more than depositors from SVB's failure.

Suggested Citation

  • Liu, Xia & Megginson, William & Tran, Nhu & Wei, Siqi, 2024. "Who Loses Most When Big Banks Suddenly Fail? Evidence from Silicon Valley Bank Collapse," Finance Research Letters, Elsevier, vol. 59(C).
    • Handle: RePEc:eee:finlet:v:59:y:2024:i:c:s1544612323011789
    DOI: 10.1016/j.frl.2023.104806
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    More about this item

    Keywords

    Silicon Valley Bank; Event Study; Commercial Banking;
    All these keywords.

    JEL classification:

    • G21 - Financial Economics - - Financial Institutions and Services - - - Banks; Other Depository Institutions; Micro Finance Institutions; Mortgages
    • G30 - Financial Economics - - Corporate Finance and Governance - - - General

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